Non-healing bone fractures and periodontal bone loss constitute significant clinical problems with few approved medical options. Bone repair is enhanced by the presence of osteoblasts or osteoblastic precursor cells. Subcutaneous adipose tissue is a plentiful, accessible, and replenishable source of human stromal cells for transplantation. In Phase I of this SBIR, we tested the hypothesis that human adipose tissue-derived stromal cells are capable of osteoblast function. Substantial in vitro data indicates that these stromal cells differentiate into cells biochemically and morphologically similar to osteoblasts. The ability of these cells to form bone in vivo was examined as well. Phase II of this SBIR will extend these in vivo experiments. Specific Aim 1 examines the ability of human adipose tissue-derived stromal cells to form ectopic bone in hydroxyapatite ceramic cubes implanted subcutaneously in immunodeficient mice. Specific Aim 2 explores whether the introduction of a modified bone morphogenetic protein receptor will enhance mineralization by these cells in vitro. Specific Aim 3 will determine if these modified bone morphogenetic protein receptor expressing stromal cells form bone more rapidly and efficiently than control cells using the in vivo murine model described in Aim 1. Together, these studies will provide a strong foundation for pre-clinical experiments in a large animal (canine) fracture repair model. PROPOSED COMMERCIAL APPLICATION: This technology will provide a cost-effective alternative source of stromal cells capable of osteoblast differentiation for autologous and allogeneic transplantation into sites of bone defects and fractures. This has commercial application to orthopedic and periodontal surgical treatments of joint replacement, fracture repair, and bone resorption secondary to tooth decay.